Over at Forbes we have a lengthy piece discussing “10 Reasons To Be More Optimistic About Broadband Than Susan Crawford Is.” Crawford has become the unofficial spokesman for a budding campaign to reshape broadband. She sees cable companies monopolizing broadband, charging too much, withholding content and keeping speeds low, all in order to suppress disruptive innovation — and argues for imposing 19th century common carriage regulation on the Internet. We begin (we expect to contribute much more to this discussion in the future) to explain both why her premises are erroneous and also why her proscription is faulty. Here’s a taste:
Things in the US today are better than Crawford claims. While Crawford claims that broadband is faster and cheaper in other developed countries, her statistics are convincingly disputed. She neglects to mention the significant subsidies used to build out those networks. Crawford’s model is Europe, but as Europeans acknowledge, “beyond 100 Mbps supply will be very difficult and expensive. Western Europe may be forced into a second fibre build out earlier than expected, or will find themselves within the slow lane in 3-5 years time.” And while “blazing fast” broadband might be important for some users, broadband speeds in the US are plenty fast enough to satisfy most users. Consumers are willing to pay for speed, but, apparently, have little interest in paying for the sort of speed Crawford deems essential. This isn’t surprising. As the LSE study cited above notes, “most new activities made possible by broadband are already possible with basic or fast broadband: higher speeds mainly allow the same things to happen faster or with higher quality, while the extra costs of providing higher speeds to everyone are very significant.”
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MRUniversity, the “massive open online course” project of Tyler Cowen and Alex Tabarrok, has just launched several new courses today, including one on the economics of the media, featuring guests lessons by yours truly and Adam Thierer. From the site:
In the Information Age, media is everywhere. This course will help you make sense of it all, providing insight into the structure of media firms, the nature of their products and how they make money.
Is media biased? Is consolidation of media companies bad for consumers? This course will address those questions as well as how the government effects the structure of media through policies such as net neutrality, copyright, TV regulation and spectrum allocation.
This course will provide a general background on the research from economists on media and journalism. There will be a lot of economics and not too much math.
If you pass the final exam, you will earn our “Economics of the Media” certificate on your profile.
Putting together a couple of 5-minute lessons was a lot harder than it sounded when we were asked to contribute, and it’s given me greater appreciation for what Tyler and Alex are doing with this project. It worth the hard work, though. They are reaching thousands of students for much the same effort that would go into a regular university course.
Matt Yglesias today responded with a post of his own to a NYT article about sports channels and cable pricing by Brian Stelter that Yglesias believed had “bad analysis.” I’m here to defend Stelter a little bit because I think Yglesias was too harsh and that Yglesias erred in his own post about the nature of cable bundling. Yglesias’ posts on cable bundling are good, and especially valuable because his Slate and ThinkProgress audiences are not the most receptive to economic justifications for perceived unfair corporate pricing schemes. In part due to him I suspect, you rarely hear econ and business bloggers calling for a la carte pricing of cable channels.
And Yglesias is certainly right that you can’t really complain about the price of your cable package, which includes the few channels you watch plus the sports channels you don’t watch, because you obviously value the channels more than the price you pay per month, even if the sports are a “waste.” He falters when he says
So since those channels are worth $60 to you, even if unbundling happens your cable provider is going to find a way to charge you approximately $60 for them. Because at the end of the day, you’re paying your cable provider for access to the channels you do watch—not for access to the channels you don’t watch. The channels you don’t watch are just there. If the channels you do watch are worth $60 to you, then $60 is what you’ll pay for them.
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By Berin Szoka and Ben Sperry
You’d think it would be harder for government to justify regulating the Internet than the offline world, right? Wrong—sadly. And Congress just missed a chance to fix that problem.
For decades, regulators have been required to issue a cost-benefit analysis when issuing new regulations. Some agencies are specifically required to do so by statute, but for most agencies, the requirement comes from executive orders issued by each new President—varying somewhat but each continuing the general principle that regulators bear the burden of showing that each regulation’s benefits outweigh its costs.
But the FCC, FTC and many other regulatory agencies aren’t required to do cost-benefit analysis at all. Because these are “independent agencies”—creatures of Congress rather than part of the Executive Branch (like the Department of Justice)—only Congress can impose cost-benefit analysis on agencies. A bipartisan bill, the Independent Agency Regulatory Analysis Act (S. 3486), would have allowed the President to impose the same kind of cost-benefit analysis on independent regulatory agencies as on Executive Branch agencies, including review by the Office of Information and Regulatory Affairs (OIRA) for “significant” rulemakings (those with $100 million or more in economic impact, that adversely affect sectors of the economy in a material way, or that create “serious inconsistency” with other agencies’ actions).
Republican Senators Rob Portman and Susan Collins joined with Democrat Mark Warner in this important cause—yet the bill has apparently died during this lame duck Congress. While some public interest groups have attempted to couch their objection on separation-of-powers grounds, their ultimate objection seems to be with subjecting the regulatory state’s rulemaking process to systematic economic analysis—because, after all, rigor makes regulation harder. But what’s so wrong with a cost-benefit analysis? Continue reading →
“All this top-40s music sounds the same.” I think we’ve all heard this sentiment. The nature of regional radio broadcasting almost requires a regression to the mean in musical tastes. A radio station cannot be all things to all people. I suspect most people will be surprised to learn that some of the most innovative radio broadcasts are taking place at hundreds of stations across the country—and only few people can listen to them. These stations, known as low power FM (LPFM), carry niche programming like independent folk rock music, fishing shows, political news, reggae, blues, and religious programming. (And one station in Sitka, Alaska consists entirely of a live feed of whale sounds.) Continue reading →
Yesterday it was my privilege to speak at a Free State Foundation (FSF) event on “Ideas for Communications Law and Policy Reform in 2013.” It was moderated by my friend and former colleague Randy May, who is president of FSF, and the event featured opening remarks from the always-excellent FCC Commissioner Robert McDowell.
During the panel discussing that followed, I offered my thoughts about the problem America continues to face in cleaning up communications and media law and proposed a few ideas to get reform done right once and for all. I don’t have time to formally write-up my remarks, but I thought I would just post the speech notes that I used yesterday and include links to the relevant supporting materials. (I’ve been using a canned version of this same speech at countless events over the past 15 years. Hopefully lawmakers will take up some of these reforms some time soon so I’m not using this same set of remarks in 2027!)
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This Wednesday the Information Economy Project at George Mason University wil present the latest installment of its Tullock Lecture series, featuring Thomas G. Krattenmaker, former director of research at the FCC. Here is the notice:
Thomas G. Krattenmaker
Former Director of Research, FCC
Former Professor of Law, Georgetown University Law Center
Former Dean and Professor, William and Mary Law School
Wednesday, October 17, 2012
The Information Economy Project at George Mason University
proudly presents The Tullock Lecture on Big Ideas About Information
4:00 – 5:30 pm @ Hazel Hall Room 215
GMU School of Law, 3301 Fairfax Drive, Arlington, Va.
(Orange Line: Virginia Square-GMU Metro)
Reception to Follow in the Levy Atrium, 5:30-6:30 pm
In its June 21, 2012 opinion in FCC v. Fox, the Supreme Court vacated reasoned judgments of the Second Circuit, without one sentence questioning the validity or wisdom of those judgments. Although the Court absolved Fox on a technicality, its opinion appears to reflect a post-modern approach to First Amendment jurisprudence concerning broadcast speech, whereby neither precedent nor principle control outcomes. This indulgent approach to a government censorship bureau appears to acquiesce in an unconfined, unprincipled, and unwarranted seizure of regulatory power by the FCC. The Fox opinion thus compounds and enables a grave regulatory failure; whether any sound broadcast indecency policy or legal regime is feasible is perhaps debatable, but the Federal Communications Commission is wholly incapable of administering such a regime. The lecture will be preceded by a short introduction by Fernando Laguarda.
Register here.
Vinton Cerf, one of the “fathers of the internet,” discusses what he sees as one of the greatest threats to the internet—the encroachment of the United Nations’ International Telecommunications Union (ITU) into the internet realm. ITU member states will meet this December in Dubai to update international telecommunications regulations and consider proposals to regulate the net. Cerf argues that, as the face of telecommunications is changing, the ITU is attempting to justify its continued existence by expanding its mandate to include the internet. Cerf says that the business model of the internet is fundamentally different from that of traditional telecommunications, and as a result, the ITU’s regulatory model will not work. In place of top-down ITU regulation, Cerf suggests that open multi-stakeholder processes and bilateral agreements may be a better solutions to the challenges of governance on the internet.
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There are a lot of inaccurate claims – and bad economics – swirling around the Universal Music Group (UMG)/EMI merger, currently under review by the US Federal Trade Commission and the European Commission (and approved by regulators in several other jurisdictions including, most recently, Australia). Regulators and industry watchers should be skeptical of analyses that rely on outmoded antitrust thinking and are out of touch with the real dynamics of the music industry.
The primary claim of critics such as the American Antitrust Institute and Public Knowledge is that this merger would result in an over-concentrated music market and create a “super-major” that could constrain output, raise prices and thwart online distribution channels, thus harming consumers. But this claim, based on a stylized, theoretical economic model, is far too simplistic and ignores the market’s commercial realities, the labels’ self-interest and the merger’s manifest benefits to artists and consumers.
For market concentration to raise serious antitrust issues, products have to be substitutes. This is in fact what critics argue: that if UMG raised prices now it would be undercut by EMI and lose sales, but that if the merger goes through, EMI will no longer constrain UMG’s pricing power. However, the vast majority of EMI’s music is not a substitute for UMG’s. In the real world, there simply isn’t much price competition across music labels or among the artists and songs they distribute. Their catalogs are not interchangeable, and there is so much heterogeneity among consumers and artists (“product differentiation,” in antitrust lingo) that relative prices are a trivial factor in consumption decisions: No one decides to buy more Lady Gaga albums because the Grateful Dead’s are too expensive. The two are not substitutes, and assessing competitive effects as if they are, simply because they are both “popular music,” is not instructive. Continue reading →
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.